Why Is the Fed Still at Zero? Bernanke Playing with Inflation Fire, Peter Boockvar Says

The newswires probably made too much of Bullard's comments - and headline writers overlooked his caveats: "The 'too low for too long' argument may weigh heavily on the FOMC this time," he said.

But TIPS spreads did widen sharply Wednesday and the bottom line is "the market is becoming worried about inflation," according to Peter Boockvar, equity strategist at Miller Tabak. "Not hyperinflation, not crazy inflation but inflation nonetheless."

So the $64 trillion question remains: When will the Fed act?

"The Fed has rates a zero. That was an emergency rate. The emergency is clearly is over. So why do you still have rates at zero. What are you afraid of?," Boockvar wonders. "Does the biggest economy in the world not function with rates above zero? That's what they're saying about us and I don't have that kind of pessimism."

Rather than speculate about when the Fed will stop talking about exit strategies and actually act, Boockvar believes "the market is going to force their hand," via much higher Treasury rates, another leg down for the dollar and surge in gold, or some combination thereof.

Long worried about inflation, Boockvar nonetheless believes Ben Bernanke's comments Monday about the Fed being "attentive to the implications of changes in the value of the dollar," could be the beginning of a concerted campaign by policymakers to jawbone the dollar higher.

"I firmly believe Bernanke will be all talk and no action with regards to our currency [but] the trade has gotten extremely crowded and we may now face...a countertrend rally" for the buck, he wrote earlier this week.

Stay tuned for an upcoming segment where Boockvar gives his views on how to invest for an inflationary environment.